Proceeds to Fund Debt Repayment and New Investments
CAMARILLO, Calif.--(BUSINESS WIRE)--Aug. 23, 2007--Vitesse
Semiconductor Corporation (Pink Sheets:VTSS) today announced a
definitive agreement to sell a portion of its storage products
business to Maxim Integrated Products, Inc. (NASDAQ:MXIM) for $63
million in cash and potential earn-out payments of up to $12 million
in the aggregate. Vitesse also announced $30 million in new financing,
which the Company will use, along with the sale proceeds, to repay its
existing credit facility and to invest in its business.
"As a result of these transactions, Vitesse is better focused on
its core Networking and Ethernet markets where we have strong
competitive advantages and can be a leader. Further, we are now
positioned with the right capital base to build a sustainable business
model and invest in our future growth," said Christopher R. Gardner,
chief executive officer of Vitesse.
Vitesse Will Focus on Networking and Ethernet IC Portfolios
Maxim will acquire Vitesse's Serial Attached SCSI (SAS), Serial
Attached ATA (SATA) expander product segments, enclosure and baseboard
management devices and certain other assets of Vitesse's Storage
Products Division. The products being divested accounted for
approximately $20 million of Vitesse's consumption during the 12
months ended June 30, 2007.
Under the terms of the agreement, Vitesse will receive a cash
payment at closing in the amount of $63 million. Additionally, Vitesse
may receive cash earn-out payments of up to $12 million upon achieving
certain commercial milestones over the period of Vitesse's fiscal year
2008. The transaction is expected to close in the fourth calendar
quarter of 2007 following the satisfaction of regulatory requirements
and other customary closing conditions.
Vitesse will retain its RAID-on-Chip (ROC) and Fibre Channel
product segments, which had been part of the Storage Products Division
and will be integrated into its continuing operations. Many of these
products complement the Company's Networking and Ethernet portfolios
that serve the Enterprise market. Both the ROC and Fibre Channel
product segments have an established customer base with active designs
that are consistent contributors to the Company's total business.
As a result of the divestiture, Vitesse will discontinue its
Storage Products Division and anticipates a reduction in operating
expenses of approximately $2.5 million per quarter in the first full
quarter following the close date. Vitesse will continue to deliver on
its commitments to all customers for all retained products that were
previously part of the Storage Products Division.
"This sale allows us to focus all our attention on the many growth
opportunities we see in our core Networking and Ethernet IC
businesses. Our goal is to deliver improved results and shareholder
returns as we strategically focus our financial, technical, marketing
and sales resources on our best opportunities," said Mr. Gardner. "We
would like to thank all of our storage employees for their many
contributions to Vitesse."
Credit Suisse Securities (USA) LLC acted as financial advisor and
Perkins Coie LLP acted as legal counsel to Vitesse in connection with
Financing and Debt Repayment
Whitebox VSC, Ltd. agreed to lend Vitesse $30 million and may lend
up to an additional $15 million. The loan will be for four years and
will be secured by substantially all of Vitesse's assets. The closing
of the loan is subject to a number of conditions, including the
concurrent closing of the divestiture of the storage products business
In connection with this loan agreement, Vitesse and Whitebox also
entered into a Senior Unsecured Convertible Note Purchase Agreement
that gives Whitebox the right - until the third anniversary of the
initial funding - to purchase convertible notes in an aggregate
principal amount of up to $45 million, which Vitesse would use to
repay amounts outstanding under the loan. These convertible notes, if
issued, would be convertible into the Common Stock of Vitesse at an
initial conversion rate of $2.00 per share of Common Stock, subject to
Vitesse intends to use approximately $15 million of the proceeds
of the debt financing, as well as the proceeds from the sale of the
Storage Products assets, to repay the Company's current facility with
affiliates of Tennenbaum Capital Partners. Tennenbaum has agreed that,
in the unlikely event it is not paid in full, it will release its
liens on the Storage Products assets being sold and the parties have
agreed to revise certain provisions of the current credit facility.
Rich Yonker, chief financial officer of Vitesse, said, "In
combination with our positive cash flow from operations, this
transaction will allow Vitesse to selectively invest in areas where we
believe we can generate solid returns."
Credit Suisse Securities (USA) LLC acted as financial advisor and
O'Melveny & Myers LLP acted as legal counsel to Vitesse in connection
with the transaction.
Vitesse designs, develops and markets a diverse portfolio of
high-performance, cost-competitive semiconductor solutions for
communications and storage networks worldwide. Engineering excellence
and dedicated customer service distinguish Vitesse as an industry
leader in Gigabit Ethernet LAN, Ethernet-over-SONET, Fibre Channel,
Optical Transport, and other applications. Vitesse innovation empowers
customers to deliver superior products for Enterprise, Access, Metro,
and Core applications. Additional company and product information is
available at www.vitesse.com.
Vitesse is a registered trademark in the United States and/or
other jurisdictions of Vitesse Semiconductor Corporation. All other
trademarks or registered trademarks mentioned herein are the property
of their respective holders.
Statements made in this release that are not historical facts are
"forward-looking" statements (as defined in the Private Securities
Litigation Reform Act of 1995) that are based on management's current
expectation, and involve risks and uncertainties and are subject to
change at any time. These forward-looking statements may include, but
are not limited to, statements containing words such as "anticipate,"
"believe," "plan," "estimate," "expect," "hope," "intend," and similar
expressions. Factors that could cause actual results to differ are
identified in the public filings made by Vitesse with the Securities
and Exchange Commission and include the fact that we have previously
disclosed restatement of our financial statements and the fact that we
have not filed all of our reports required by the Securities Exchange
Act of 1934. More information on factors that could affect our
business and financial results are included in our public filings made
with the Securities and Exchange Commission, which are available on
the web site of the Securities and Exchange Commission, www.sec.gov.
The forward-looking statements involve known and unknown risks,
uncertainties and other factors that are, in some cases, beyond our
control. We caution investors that any forward-looking statements made
by us are not guarantees of future performance and that actual results
of the company could differ materially from those expressed in or
implied by any such forward-looking statements. We disclaim any
obligation to update any such factors or to announce publicly the
results of any revisions to any of the forward-looking statements to
reflect future events or developments.
Ronda Grech, +1-805-388-3700
SOURCE: Vitesse Semiconductor Corporation